The stock market has proven that a sell-off actually can occur again. These market panics are never a welcome event when they are taking place because they feel bad, but they are actually quite necessary to see in rational markets. After a 665.75 point drop to 25,520.96, the Dow Jones Industrial Average is now down over 1,000 points from its all-time high. That took almost as little time as it did to get up there in there in the first place.
What investors have to consider now is that this bull market is now almost nine years old. And investors cannot ignore that the trend that has worked for over five years is to buy the top stocks and major indexes after each pullback. Investors are wondering how they should be positioning their portfolios for 2018 and beyond.
It’s important to think about the big picture after a sell-off. Corporate tax reform is only just starting to be felt, accelerating global growth is expected in 2018, better expensing and repatriation are taking place, and even pay raises and bonuses are being handed out to millions of U.S. workers. All this has to be considered for 2018. The markets got spooked by a rapid rise in longer dated Treasury yields, as well as some selective mixed earnings news from Apple and Alphabet and bad earnings news from Exxon and Chevron. And there is some additional fear that inflation may tempt the Federal Reserve to hike interest rates faster.
So what are investors to do looking forward in 2018? One strategy for investors to feel good about stocks into or after a sell-off is by focusing on the companies that are being treated the best by the market and the business cycle. That sounds simple enough, but this is far more pointed. A good rule is to pick companies that are beating earnings expectations, that also have strong expectations for the months and quarters ahead, and ultimately that are also the companies receiving multiple analyst upgrades or target price hikes. This is what we are referring to specifically.
The reality in a bull market is that investors should not be owning companies that are mired in problems and have no long-term remedy in hand. Sure, there are some exceptions. But why fight a great bull market? The rule in a major bull market is this: Don’t pay up to eat crow when there is an endless supply of free meat and potatoes.
24/7 Wall St. reviews dozens of analyst research reports each day of the week. While there are many analyst upgrades and price hikes in there, not so many stocks get analyst upgrades and price hikes from three or more analysts and see their stocks rise in a down market. In general, particularly in the earnings season in January and February of each year, it should be inferred that analysts on Wall Street are telling you these are the stocks they see as either the safest from downside or that they think will have solid upside.
Additional color and commentary have been added on most of the daily analyst calls, and some have been linked to more detailed and expansive pieces from last week. We also have shown a weekly and year-to-date performance on each stock. While we mentioned six companies as runner-ups, we screened out the stocks that fell during the week so that investors can see which strongly recommended stocks actually managed to rise in a down market during the week’s selling pressure.
As a reminder, the Dow fell 4.1% this past week, but it is still up 3% so far in 2018. The S&P 500 was down 3.9% last week, but it is still up 3.2% so far in 2018. And the Nasdaq 100 was down by 3.7% this last week, but it’s still up 5.7% year to date.
The following 10 stocks received multiple analyst rating upgrades or price target hikes and also managed to have a gain for the week, even during the sell-off from the week of February 2, 2018.